Iraq cabinet approves $17bn Shell gas deal

Iraq's cabinet approved on Tuesday a $17 billion deal with Royal Dutch Shell and Mitsubishi to capture gas that is now being flared off into the atmosphere at southern oilfields, a government spokesman said.

Capturing flared gas is considered vital to ramping up power production in Iraq, where electricity demand is around double the supply.

The 25-year venture is expected to help Iraq make use of more than 700 million cubic feet per day of gas being burned off at three major fields around the southern oil hub of Basra.

"The cabinet approved the deal through establishment of a company called Basra Gas Company, a joint venture of the South Gas Company and the consortium of Shell and Mitsubishi, to capture the flared gas from the fields of Rumaila, Zubair and West Qurna," spokesman Ali al-Dabbagh said.

"The value of the contract is $17bn for 25 years," Dabbagh said.

Iraq and the companies initialled a final draft contract in July.

Rebuilding after years of war and international sanctions, Iraq has struggled to provide electricity.

The Shell joint venture is at the forefront of Iraq's plans to modernise energy facilities. Iraq loses an estimated 1 billion cubic feet per day of gas, mostly from southern fields.